How to Avoid Common Mistakes in Crypto Assets Trading

In my Crypto Assets trading career, I have made quite a few costly mistakes. Although these failures were painful, they also helped me grow into a better investor. Today, I want to share the five most important lessons in the hope that they will help you avoid detours in the crypto market.

1. Beware of "Position Bias"

Position bias refers to the illusion that arises when you hold an asset and see its price increase, leading you to believe that the fundamentals of the asset are improving. This psychological bias can cause us to overlook potential risk signals.

Taking my massive losses on Luna as an example. Although I was aware of the decoupling risk associated with algorithmic stablecoins, I underestimated the actual likelihood of this risk due to my position bias. When UST started to decouple, I should have immediately reduced at least 50% of my position, but I chose to ignore these warning signs and ultimately paid a heavy price.

To overcome position bias, we need to:

• Stay objective and regularly review whether the investment reasons still hold.
• Set clear exit conditions and strictly enforce them.
• Do not let emotions affect judgment, maintain rational analysis.

2. Establish a clear stop-loss strategy

The lack of a clear stop-loss strategy is another common mistake. Taking Beam as an example, I did not set an effective stop-loss for it, resulting in significant losses.

A good stop-loss strategy should:

• Set multiple stop-loss conditions based on different time frames
• Combine technical indicators and key support levels
• Use different stop-loss ratios for long-term and short-term trading.
• Use price alerts to remind yourself to execute stop-loss in a timely manner.

Remember, even long-term investments require a stop-loss strategy. If you decide not to set a stop-loss, you must be mentally prepared to bear the full loss.

3. Timely Take Profit

Failing to profit in a timely manner can be one of the most common and fatal mistakes. I made this mistake on Lucky Coin and missed out on a profit of 1.7 million dollars.

To avoid this issue:

• Withdraw the initial investment at least when the price doubles.
• Set phased profit targets and strictly enforce them.
• Don't be misled by short-term surges, stick to your profit strategy.
• Considering market liquidity, taking profits in batches may be safer.

Remember, making a profit is always better than not making a profit. Even if you miss out on some gains, it is much better than ending up with nothing.

4. Reasonable Position Management

Mistakes in position management can lead to emotional trading or missed significant opportunities. My advice is:

• Investment in a single coin should not exceed 5% of the total investment portfolio.
• The projects that are particularly favored can be increased to a maximum of 10%, but caution is advised.
• With the rise in coin prices, timely adjustments to position ratios are necessary.
• Control risks by obtaining profits in batches

Reasonable position management can help you achieve considerable returns while effectively controlling risk.

5. Avoid holding too many coins

In 2021, my portfolio once expanded to 40-50 coins. This made risk management extremely difficult.

My suggestion is:

• Limit the portfolio to 5-10 high-confidence coins.
• Establish in-depth technical or product arguments for each position
• Regularly review your investment portfolio and remove projects that are no longer promising.
• Focus on researching and managing a few high-quality projects.

By reducing the number of positions, you can focus more on researching and managing each coin, thereby improving the overall efficiency and returns of your investments.

Summary

Becoming a successful Crypto Assets investor requires continuous learning and improvement. By recognizing and avoiding these common mistakes, you can significantly increase the probability of investment success. Remember, everyone makes mistakes; the key is to learn from them and avoid repeating them in future trades.